Maersk Line predicts tough year
Maersk Line is expecting a negative or at least neutral result in 2012 after the container segment of the AP Moller-Maersk Group reported a US$599 million loss in the first quarter.
The Group delivered a profit of $1.2 billion and a return on invested capital of 10 percent for Q1, helped by strong oil and gas results, and said it expected a 2012 result "slightly lower" than last year.
The world’s biggest container carrier said its financial forecast was based on the assumption that the general rates increases since March 2012 would continue.
“Maersk Line announced a general rate increase on the Asia-Europe trades from March, that was almost fully accepted, supported by a nine percent reduction in capacity. Most of the capacity withdrawal came from a reduction of the average speed,” the Danish carrier said in its interim report.
In a stark illustration of the damage caused by excess tonnage in a poor rate environment, Maersk Line’s volume increased by 18 percent while the average freight rate declined by nine percent compared to Q1 last year.
The line said following its introduction of the Daily Maersk service on Asia-Europe, other lines on the trade had consolidated their services in three alliances – CMA-CGM/MSC, the G6 and the CKYH/Evergreen alliances. The result was that 85 percent of the volume on the Asia-North Europe trades is now handled by Maersk Line and the alliances.
Looking ahead, Maersk said the outlook was “sensitive towards changes in the market balance”. Global demand for seaborne containers was expected to increase by four to six percent in 2012, with lower increases on Asia-Europe but higher increases on North-South trades.
The line provided four key value drivers that will affect Group profit based on expected earnings and “all other things equal”: Every $10 per barrel movement in the oil price costs or saves the line $200 million a year; a $100 per tonne change in bunker fuel is also worth $200 million; a $100 change in the container freight rate per FEU will save/cost Maersk $700 million a year, and container volume rising or falling by 100,000 FEUs will save/cost $200 million.